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Bottlenecks in the Development of the Finnish Private Service Sector: How to Accelerate Productivity?

Author

Listed:
  • Kuosmanen, Natalia
  • Kaitila, Ville
  • Kuusi, Tero
  • Maczulskij, Terhi

Abstract

Productivity growth in Finland’s service industries has fallen behind that of peer countries, weakening the economy’s growth potential. This policy brief summarizes key findings from ETLA’s recent research on the challenges and opportunities for service-sector productivity. The analyses show that capital intensity in services is low, firms employ fewer workers than profit-maximizing conditions would imply, and digital adoption remains uneven across firms and industries. Service imports increase employment but do not improve productivity. Generative artificial intelligence (GenAI) could provide a new source of growth, but its impact will depend on skills and technology adoption. The brief presents policy recommendations to support investment, skills development, and structural reforms to strengthen productivity in the service sector.

Suggested Citation

  • Kuosmanen, Natalia & Kaitila, Ville & Kuusi, Tero & Maczulskij, Terhi, 2025. "Bottlenecks in the Development of the Finnish Private Service Sector: How to Accelerate Productivity?," ETLA Brief 164, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:briefs:164
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    File URL: https://www.etla.fi/wp-content/uploads/ETLA-Muistio-Brief-164.pdf
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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